Update, August 1, 2019: While LedgerX announced that it had launched the first physically settled bitcoin futures contracts, the U.S. Commodity Futures Trading Commission (CFTC) has not indicated any official approval. As of this update, investors can sign up for early access to the futures platform, but there's no clear indication of when it will actually go live. Though LedgerX did receive approval as a derivates clearing organization from the CFTC, it's possible that this was not enough to officially offer physically settled bitcoin futures contracts.
Last week Bakkt, an affiliate of the New York Stock Exchange (NYSE) parent company Intercontinental Exchange (ICE), was set to become the first company to pay out traders in bitcoin after its soft launch on July 22, 2019.
However, LedgerX has beaten Bakkt to the punch after officially launching the first physically settled bitcoin futures contracts today, July 31, 2019. The new product allows U.S. residents to trade futures contracts in exchange for real bitcoin (the “physical” commodity) so long as they have a government-issued ID.
According to Paul Chou, CEO of LedgerX, traders are not required to bet on products with U.S. dollars and can buy contracts using only bitcoin. Chou said the new contracts help customers avoid waiting for bank transfers and prevent issues with other components of the U.S. banking system. He explained that the goal of the new contracts is not necessarily to compete with cash contracts and that the two types of contracts “are entirely different.”
“If you imagine somebody that deposits bitcoin, they would not have to use the U.S. banking system at all. That’s why physically-settled is very important,” Chou said, per Coindesk. “I think [it ’s] one of the most unique use cases for bitcoin, where you’re using cryptocurrencies as the only collateral.”
Another major aspect of the new futures contracts is that both institutional and retail investors can utilize the product as long as they pass Know-Your-Customer (KYC) protocols. While institutional clients have the ability to trade futures with any LedgerX product, retail customers must use Omni, the latest trading platform from LedgerX. According to Chou, the uniqueness of Omni’s platform is derived from its simplicity.
In order to open an account with Omni, retail users must wire $10,000 to the platform. Once the account is made, users can trade bitcoin, bitcoin options and bitcoin futures for free, according to the company website.
LedgerX launched in 2017 and became the first federally regulated derivatives exchange for bitcoin in the U.S. after registering with the U.S. Commodity Futures Trading Commission (CFTC) as a swap execution facility and derivatives clearing organization. Last month, the CFTC also approved LedgerX LLC as a designated contract market according to a press release at the time.